How to claim VAT back
Although it sounds complex, reclaiming VAT input tax can actually be quite straightforward.
This guide serves as a brief summary of a very large topic. If you are VAT registered, you can usually recover the VAT paid on goods and services purchased for use in your business.
This can include:
- Goods for resale
- Office supplies e.g. stationery, utilities, computer software
- Assets e.g. machinery, computers
- Travel and subsistence for employees
- Import VAT
In addition, there are also instances when an apportionment must be made or certain types of costs where input tax is not recoverable.
Goods used for personal use
If an item has been used for both personal and business matters, then an apportionment of the input tax should be made. There is no set method for calculating this apportionment but it must be ‘fair and reasonable’.
If you incur costs entertaining any clients, prospective clients or suppliers (anyone who is not an employee) then any input tax is not recoverable. The only exception to this is if the client or prospective client is based overseas.
If you make exempt supplies (e.g. domestic rental, insurance) then input tax cannot be recovered that relate directly to these supplies.
Any costs that can relate to both exempt and taxable supplies (e.g. office costs) should be apportioned. This is a separate area of VAT and we will be happy to give advice about how to calculate the proportion of input tax VAT that can be reclaimed.
There is also a ‘de minimis’ limit of £625 per calendar month and, if the total input tax that relates to exempt supplies is below this then, all the input tax can be recovered.
Unless you are a car dealer or a taxi driver, there are very few other circumstances when the input tax can be recovered on a car, and the evidence required to demonstrate 100% business use is very detailed. If you have a lease car run through the business, 50% of the lease fee is normally recoverable.
Input tax is normally recoverable on a commercial vehicle.
No VAT will be charged on these items, so no VAT is recoverable.
If you are involved in the construction of new dwellings, input tax on white goods and other ‘removeable items’ is not permitted.
This is a short summary of what can and cannot be reclaimed. The evidence requires is almost always a proper tax invoice showing details including a description of the transaction including date, VAT amount, supplier, and their VAT number.
For further guidance, speak to our VAT advisors today.